The city of Minneapolis issued $1.4 billion worth of building permits last year, it said Thursday, the fourth year in a row above the $1 billion threshold but well below 2014’s $2 billion level.
That decrease is in large part due to 2014’s numbers being skewed by construction of the U.S. Bank Stadium for the Minnesota Vikings and the Downtown East redevelopment effort, which is anchored by the new Wells Fargo & Co. office towers. About $1 billion of the permit value in 2014 was for those two projects.
The city was unable to precisely break out the value of permits issued for those projects in 2015, though it was significantly less. Construction of both projects started in 2014 and much of the permitting for them happened then and in 2013. For the stadium, a $1.1 billion project, more than 70 percent of the estimated permit value was issued by the end of 2014.
While the $1 billion threshold makes a good sound bite for city leaders, it’s a relatively normal level for construction activity in the city when historical data is adjusted for inflation. Between 2000 and 2005, the city surpassed $1 billion every year, in adjusted terms, and has hit it every year since 2012.
“I think the market we are in right now is very similar to what we were in between 2000 and 2005. Commercial real estate is very cyclical. We build until we’ve overbuilt, then we back off and start over again,” said Gina Dingman, president and director of NAI Everest, a brokerage.
Hotel development was the rising star of the construction scene last year. Growing demand for new lodging in the city has usurped residential housing as the darling of the development community.
Work began last year on four sizable hotel projects in downtown Minneapolis. Three are new buildings and one is a historic renovation. The costs on these projects range from $10 million to more than $50 million.
“It’s exciting to see what a robust mix of development opportunities 2015 brought to Minneapolis — hotels, offices, commercial and retail,” D. Craig Taylor, Minneapolis’ director of community planning and economic development, said in a statement.
Housing projects, which led the construction rebound following the recession, took a smaller role last year. More than 1,500 new dwelling units were added across the city through major developments, including the Portland Tower, which is one of only a few condominium projects since the housing crash of 2008.
“There were more permits pulled for multifamily last year, but for smaller projects,” said Herb Tousley, director of real estate programs at the University of St. Thomas. “There was still a lot of activity, just not as many of those large complexes, which isn’t a bad thing.”
Still, downtown Minneapolis accounted for the lion’s share of the city’s overall number. Nearly two-thirds of the total value occurred in the two City Council wards that cover downtown and their surrounding neighborhoods.
The five largest permits pulled as of September 2015 were the Wells Fargo towers at $79.9 million, the Embassy Suites hotel at $50.8 million, Xcel Energy headquarters at $44.3 million, the Portland Tower at $38.7 million and Greystar apartments on Lake Street at $35.9 million.
“We’ve got more in Downtown East and more on the other side of the river coming,” said Council Member Jacob Frey, who represents the east end of downtown and the area just across the Mississippi River. “When the swell comes you have to ride the wave home because inevitably it won’t last forever.”